The role of optimal threats in auction design
AbstractThis paper studies revenue-maximizing auctions when buyers' outside options depend on their private information and are endogenously chosen by the seller. We show that the revenue-maximizing assignment of the object can depend crucially on the outside options that the seller can choose as threats. Depending on the shape of outside options, sometimes an optimal mechanism allocates the object in an ex-post efficient way, and, other times, buyers obtain the object more often than is efficient.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 144 (2009)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/inca/622869
Externalities Optimal auctions Type-dependent outside options;
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